Don’t Save Money, Save Gold and/or Silver! Here’s Why

Over the past 12 years saving gold and/or silver has been an 8x – yes, 8 times! – more effective strategy to grow one’s wealth than banking money and I believe it will continue to be so for the foreseeable future for four reasons.

So writes James Turk (http://goldmoney.com) in edited excerpts from his original article* entitled Gold – Saving Real Money.

[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Turk goes on to say in further edited excerpts:

Savings vs. Investments

Savings and investments should not be confused. A person uses money to make an investment, whereas saving is the process of accumulating money itself. Thus, you put your money at risk when making an investment, which hopefully will become a wealth-creating asset. In contrast, savings are meant to be riskless.

In the past, savings would typically be accumulated in a disciplined way on a regular monthly basis. An individual would take a savings book along with some cash directly to the bank, which would record the deposit. Alternatively, the bank acting under standing instructions would transfer a previously specified amount of cash from a customer’s current account to his/her savings account.

Beginning in the 1970s, countries around the world, led by the United States, began pursuing monetary policies that no longer encouraged savings. The relatively sound money that had previously prevailed, when it was said that the “dollar was as good as gold”, gave way to deplorable policy that ushered in decades of money debasement. Currency as a consequence has lost purchasing power over time, and the interest that banks pay on savings accounts has not sufficiently compensated the saver. In other words, even though the nominal value of a savings account rose from the interest income being earned, the overall purchasing power of the money being saved was losing value.

Over time, the concept of saving money has lost general acceptance. No longer do people put away money in a savings account for a rainy day, retirement, or even just to save money to purchase a consumer good. Nevertheless, the worthwhileness of these objectives has not been diminished by modern disruptions to money nor has the resulting monetary disorder changed the obvious necessity that everyone needs to plan and prepare for an uncertain future. So savings remain as important today as at any time in the past, which poses an obvious problem.

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How to Better Grow Your Wealth

How can you save money today when central bank and government policy result in the erosion of your purchasing power when saving any national currency? The answer lies in the money being saved. Save gold and/or silver instead of any national currency.

1. Gold Returned 13.4% Annual Rate

Since GoldMoney launched in February 2001, I have been recommending the on-going accumulation of the precious metals through a monthly cost-averaging programme. If one followed this recommendation by purchasing $100 of gold on the last business day of every month, regardless of gold’s price, the $14,800 saved in this way over the 148 months ending May 31, 2013 would have increased to $36,366, after all purchase and storage fees. A saver of gold would haveaccumulated 26.114 ounces of gold (812.220 goldgrams), which represents a 13.4% annual rate of appreciation after the cost paid to GoldMoney for the services provided.

2. Silver Returned 12.7% Annual Rate

The results for silverwere 1,558.036 ounces accumulated with a value of $34,632 for a 12.7% annual rate of appreciation, again after all costs paid to GoldMoney. The lower rate is a result of higher fees for silver purchases and storage as well as its underperformance over this period, during which the gold/silver ratio has climbed from 59.7 to 62.7 ounces of silver to equal one ounce of gold.

3. A Savings Account Returned 1.6%

The accumulation of both gold and silver did better than money in a savings account. In nominal terms, the amount saved rose only by 1.6% per annum over this period, less than the 2.4% government reported annual inflation rate, and far less than the 9.4% inflation rate reported by ShadowStats, which is probably closer to the true rate at which the dollar is losing purchasing power.

It is worth noting that had a larger amount been saved through GoldMoney, higher rates of appreciation for both precious metals would result because larger purchases incur lower fees…

4. Additional Advantages

[In addition to the above increases in one’s purchasing power, such an approach to savings:]

a) precluded the need to follow market trends, or, indeed,

b) saved one from being distracted by the day-to-day noise impacting gold and silver prices….

c) allowed for one’s savings to be accumulated outside the banking system, even as the risks of bank deposits became increasingly apparent

d) prevented one’s savings from being adversely affected by the collapse of Northern Rock, Lehman Brothers, Cyprus (and any future collapse) which was a benefit perhaps as important as the increase in purchasing power.

Overall these are the benefits that savings are meant to achieve, but one important question remains.

[Is saving via the accumulation of gold and silver]… still a good strategy for the foreseeable future? Yes, for four reasons. [While] accumulating savings is itself a worthwhile and valuable objective for everyone to prepare for an uncertain future, saving a national currency results in the loss of purchasing power. In a continuation of the 12 – year trend now well established:

Gold and silver are likely to appreciate faster than the rate of inflation because central bank and government actions are debasing national currency, so demand for the precious metals will continue to grow.

Owning gold and silver are useful diversifiers for everyone’s portfolio. Diversification is always a good way to mitigate unpredictable outcomes and the risks from an uncertain future.

Gold and silver are money outside the banking system, which is still teetering on the edge of insolvency, meaning that more events like Northern Rock, Lehman Brothers and Cyprus are likely.

Conclusion

[Given the above,] saving a weight of precious metals suited to one’s personal needs by accumulating them through a disciplined cost-averaging programme remains a sound strategy to provide for an uncertain future. So for now, I continue to recommend it.

[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

Measuring market data using fiat currencies can be misleading. Even though an asset may rise in dollars, it may be because of declining currency value rather than true economic process. With central banks devaluing currency at record rates, gold’s steady purchasing power makes it an ideal alternative pricing mechanism. Read More »

Those who discuss gold in terms of bull or bear markets do not understand reality and do a disservice to less informed readers. Gold is money, true money, as opposed to fiat currencies. True and honest money cannot be in a bull or bear market. Its value is stable (but not constant!). Read More »

Higher interest rates [are eventually coming and]… will substantially increase the annual interest costs, the deficit, and the required borrowing/printing. More deficits, more borrowing, more printing, and higher interest rates will cause a larger deficit and more borrowing and the cycle will repeat. [You have a choice as to what you do to protect your current and future standard of living and this article sts it all out.] Words: 595

Make no mistake about it, it is the central bankers that are leading governments around by the nose, and by proxy, governments leading people around by the nose, and that “nose” is inhaling “lines” of fiat. Unless cured, all addictions end badly, and the only “cure” central bankers have for ever-increasing fiat is, ever-increasing it more. [You can protect yourself, however, by] demanding less of the valueless fiat and keeping, and growing, your wealth by buying and accumulating real value: physical gold and silver. Anything less, and you are still dealing in the imaginary world that is failing. [This article explains why that is the case.] Words: 834

Today’s world is as uncertain as any we’ve seen in some time. Sovereign-debt crises threaten major economies in Europe and Japan and the fiscal state of the United States is the worst in non-wartime history! It’s no surprise, then, that investors are becoming increasingly attracted to the safety, anonymity and purchasing-power preservation that comes with bullion ownership. That being said, one of the most-often-overlooked benefits of bullion is its ability to help you increase your wealth across currencies, so today I’ll show you how owning physical metals — and the most-precious of them all, gold in particular — can help you to boost your global net worth! Words: 896

I like gold because it’s a risk-reducing, portfolio-diversifying asset. It’s also been a strong-performing asset over the past decade – up nearly 400%. What’s more, it’s been reliable. In 2008, when the major U.S. indices plummeted 37% (and more into early 2009), gold returned nearly 6%. In addition to being an exceptional investment, however, gold has also been an exceptional investment within a portfolio context. That is, it has provided return while reducing portfolio risk. Gold has, in essence, been a free lunch. Words: 490

Some say that the gold price rises and falls, but they are grabbing the wrong end of the stick. It is the purchasing power of national currencies that rise and fall. Here is an analogy to make this point clear. When standing in a boat and looking at the shore, it is the boat (currencies) – and not the land (gold) – that is bobbing up and down. [Let me explain the value of gold further.] Words: 631

< noscript>Gold and Silver are not an investment! Let me repeat that. Gold and silver are not an investment! Gold and silver are (excuse the pun) the most “solid” form of money you can possess. Yes, these two precious metals are money!…Don’t fear owning gold my friends. Fear not owning gold and silver, especially if you are a saver. [Let me explain.] Words: 795

< noscript>In our travels to the Middle East, the Far East and South and Central America [we have found that] most people in those parts of the world see gold as the protector of wealth [as opposed to] in the West where it is viewed as a commodity for speculation… [That shouldn’t be the case. Let me tell you why.] Words: 2159

Have you ever wondered what money really is [and why we need to own some gold as a result]? You’ll notice that everyone you read has a strong opinion , but who’s right? [Let look at the situation and see if we can come to an answer that we both can agree on.] Words: 3086

One comment

Beware all those that encourage you to divest your PM’s just because the Central Bankers are fiddling with the charts most use to track the relationship of PM’s to the US$.

I believe we are seeing a Global effort to drive PM’s downward so that the big Central Banks can scoop most of it up at bargain prices, so they can further promote the use of their own paper money!

The long view of PM’s is one of security, not PM bashing by those printing paper money…

and I posted this on 06/01/13:

If you don’t think that PM’s are now being manipulated by the Central Banks, then I agree that you should not be investing in PM’s!
BUT
If you believe that printing paper money cannot go on forever then what is happening now is nothing but a huge buying opportunity!

My gut feeling is that when the PM “reversal” happens, it will be so extreme that most small investors will not be able to jump on-board before the prices have skyrocketed relative to where they are currently, due to the market dynamics that favor the really big investors.

Here is a great PM question for you, Are the Central Banks still buying Gold, and if so why?
I look forward to your comments!

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